Meeting of the Finance Audit & Risk Sub-committee


Late Items




Date:                 Wednesday 17 February 2021

Time:                9.00am


Council Chamber

Hawke's Bay Regional Council

159 Dalton Street







Item       Title                                                                                                                        Page


8.         2019-20 Annual Report Adoption Delay                                                                       3  




Finance Audit & Risk Sub-committee

Wednesday 17 February 2021

Subject: 2019-20 Annual Report Adoption Delay


Reason for Report

1.      This item updates the Finance, Audit and Risk Committee on the delay in the adoption of the 2019-20 Annual Report including the implications of adoption of the report outside of statutory timeframes.


2.      On 15 December 2020, Finance Audit and Risk Committee meet to review the 2019-20 Annual Report and recommended to Council that the Annual Report be adopted subject to final Audit clearance. 

3.      Following the meeting, officers were advised by Audit NZ on 21 December that a technical accounting policy issue had been identified during the peer review. There is a difference in the method between the value used for Council Land and Buildings and HBRIC Group Accounts that have the Port Land and Buildings consolidated into them.

4.      The discrepancy arises as Council values Land and Buildings at fair value and the Port Land and Buildings are valued at cost and presenting them in the same asset classes does not comply with PBE IPSAS 17 Property Plant & Equipment.

5.      This resulted in Council delaying the adoption of the 2019-20 Annual Report to resolve the issue.

6.      This is the only issue raised by Audit with the 2019-20 Annual Report following the recommendation by the FARS committee to Council. Following the resolution of this issue the Annual Report audit opinion can be issued.

7.      This has resulted in Council being outside the statutory deadline of 31 December 2020 for adoption of the 2019-20 Annual Report.


Property Plant and Equipment issue

8.      The issue raised by Audit NZ is a technical accounting policy difference. PBE IPSAS 17 Property Plant & Equipment requires the valuation of assets within a class to be the same. Council’s accounting policy for Land and Buildings states that assets are included at fair valuation. The accounting policy of the Port states that Land and Buildings are valued at cost.

9.      Officers have been discussing options available with Audit NZ since the 21 December to identify how the issue may be resolved.

10.    This included:

10.1.    Require Napier Port to provide fair value valuations for all land and buildings for the 2018-19 and 2019-20 to enable the adjustments to be made to the Group Accounts. This was not practically able to be carried out and was discounted as an option by Audit NZ and officers.

10.2.    Continue with the adoption of the 2019-20 Annual Report with an audit qualification regarding the discrepancy with the Fixed Assets value and accounting policy. This was agreed to be a final option if no other options were identified.

10.3.    Review the accounting policies and classification of assets against the requirements PBE IPSAS 17 Property Plant & Equipment to identify any available reclassification options.

11.    Officers have worked through option 8.3 with Audit NZ and the following has been the outcome.

11.1.    Council Land and Port Land will be split into two classes on the basis the nature/function of the Port land is sufficiently different to other land within the Group. Port Land will continue to be valued at cost and Council Land will continue to be valued at fair value.

11.2.    Port Cargo buildings will be separated into a different class due to a different use to other buildings within the Group and will be valued at cost.

11.3.    Port Admin Buildings will be included within the Council Buildings class and will be required to be valued at fair value. Audit NZ will note in the management report to Council that Council is outside its accounting policy for 2019-20 Annual Report and will require the 2020-21 Annual Report to have the Port Admin Building valued at fair value. This will not result in a qualified audit opinion.

11.4.    Consolidation of the asset classes for Vehicles, Plant and Equipment will be required to bring the Council assets and Group assets into line.

12.    Officers have worked through the required policy and presentation adjustments with Audit NZ and the adjusted Note for Fixed Assets and Accounting Policy are attached for reference.

13.    Officers have received notification by Audit NZ that Council can adopt the 2019-20 Annual Report at the Council Meeting on 24 February 2021.

14.    A copy of the updated Annual Report and draft audit opinion will be tabled at the Finance, Audit and Risk Committee meeting.

15.    Therefore the Finance, Audit and Risk Committee is not required to amend its recommendation to Council to adopt the Annual Plan from the 15 December 2020 meeting.

Late Adoption

16.    Under Section 98 of the Local Government Act 2002, Council is required to adopt the annual report within 4 months after the end of the financial year.

17.    As a result of the Covid-19 pandemic, parliament passed legislation on 5 August 2020 to extend the statutory reporting time frames by up to two months in order to ensure that there is no reduction in the quality of the financial reporting and the audit of the annual report. Therefor Council was required to adopt the 2019-20 Annual Report by 31 December 2020.

18.    Due to the late identification of this issue, Council will adopt the Annual Report outside of the statutory deadline for adoption of the annual report and below are the consequences as a result.

18.1.    Council must include a disclose that we are outside the statutory deadline and the reasons behind the non-compliance. As Council is self-disclosing there is no audit opinion implications.

18.2.    Each year the Office of the Auditor General produces an annual review/insights document on local government which includes statistics for Council that have not adopted the annual report on time. Below is an extract from the 2019 publication.


Decision Making Process

19.    Council and its committees are required to make every decision in accordance with the requirements of the Local Government Act 2002 (the Act). Staff have assessed the requirements in relation to this item and have concluded:

19.1.    The decision does not significantly alter the service provision or affect a strategic asset, nor is it inconsistent with an existing policy or plan.

19.2.    The use of the special consultative procedure is not prescribed by legislation.

19.3.    The decision is not significant under the criteria contained in Council’s adopted Significance and Engagement Policy.

19.4.    The decision is in accordance with the Finance, Audit and Risk Sub-committee Terms of Reference, specifically:

19.4.1.   The Finance, Audit and Risk Sub-committee is to satisfy itself that the financial statements and statements of service performance are supported by adequate management signoff and adequate internal controls and recommend adoption of the Annual Report by Council.

19.5.    Given the nature and significance of the issue to be considered and decided, and also the persons likely to be affected by, or have an interest in the decisions made, Council can exercise its discretion and make a decision without consulting directly with the community or others having an interest in the decision.



That the Finance, Audit and Risk Sub-committee receives and notes the “2019-20 Annual Report Adoption Delay”.


Authored by:

Bronda Smith

Chief Financial Officer


Approved by:

Jessica Ellerm

Group Manager Corporate Services





Note 9 - Property Plant and Equipment




Draft 2019-20 Annual Report Part 3 - Financials




Note 9 - Property Plant and Equipment

Attachment 1




Note 9 - Property Plant and Equipment

Attachment 1





Draft 2019-20 Annual Report Part 3 - Financials

Attachment 2